The city is considering upgrades to Lunken Airport's terminal to try to accommodate commercial airline Allegiant Air. / The Enquirer/Jason Williams

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Cincinnati has lost hundreds of thousands of dollars that could have gone toward improvements at city-owned Lunken Airport, because of poor contract management and technology problems.

A recent internal audit by the city highlights five problems, including:

• The Metropolitan Sewer District, which stores byproducts created at a nearby treatment plant on airport grounds, owes the city $420,000 for six years in back rent.

• The city didn’t collect landing fees for a “couple years” because of a poor tracking system. The estimated loss, if the problem continued for two years, was $120,000.

• The city is charging Sky Galley restaurant about $1,000 less in monthly rent than city law requires. City law also requires Lunken to collect a higher percentage of the restaurant’s gross revenue than the city has been collecting. Result: The city lost more than $105,000 in revenue.

• Landmark, the airport’s fixed-base operator that provides services such as fueling and aircraft rentals, has not paid a 1 percent fee on all revenues since 2011.

• Leases have expired on an unspecified number of hangers and other buildings at the East End airport. The city is collecting rent on the properties on a month-to-month basis, although auditors said the city might be able to raise rates if leases were actually in place.

The audit, which city officials received in mid-August, concluded the problems were not the result of wrongdoing but instead stemmed from ineffective administration.

It’s believed to be the city’s first internal audit of Lunken since 2004.

There since has been leadership turnover at both the airport and the city’s Department of Transportation and Engineering, of which Lunken is a division.

“There was a lack of continuity,” said Fred Anderton, Lunken’s current manager.

The performance audit by the city’s Citizen Complaint and Internal Audit department attributed the issues to communication between city departments, saying Lunken’s “isolation hampers the effectiveness and efficiency” of the city’s Aviation Division. The transportation department’s administrative offices are based Downtown.

Despite the audit, Lunken is financially viable, according to city records. In 2012, the airport generated $2.1 million in revenue and had a surplus of almost $720,000. As an airport that receives some Federal Aviation Administration money, Lunken is required to spend all airport-generated revenue on airport operations and projects.

ISSUES SHOULDN'T IMPACT AIRLINE'S INTEREST

City officials and aviation experts don’t believe the audit discrepancies are significant enough to hurt Lunken’s chances of landing Allegiant Air. The Las Vegas-based vacation airline continues to show interest in launching two flights a week to Orlando out of the airport.

“It certainly is a red flag, but it’s not a deal-breaker,” said local aviation expert Jay Ratliff, a former Northwest Airlines general manager.

Part of Allegiant Air’s business model is to operate out of smaller, general aviation airports to keep overhead costs down. Allegiant Air officials visited Lunken for the first time in late July, and airline officials continue to contact city officials regularly, Anderton said.

Lunken hasn’t had regularly scheduled commercial service since 1963 – except for a short-lived attempt in 1990.

“They want to make sure we’re viable, which we are,” Anderton said of Allegiant Air. “They want to make sure we’re keeping the lights on and maintaining the runways, which we are.”

Dayton, Ohio-based engineering firm Woolpert continues to study Lunken’s single terminal to determine what upgrades need to be made to accommodate commercial service and how much new infrastructure would cost.

Woolpert has completed preliminary drawings, which include adding a modular unit to serve as a waiting area. But it’ll take several weeks before the study is completed, Anderton said. Originally, Anderton had hoped Woolpert would be done by early August. But Lunken is in a flood plain, and determining how that will affect upgrades is among the reasons the study is delayed.

MSD: WE WEREN'T BILLED FROM 2006-2011

The MSD money alone could help make the upgrades needed to lure Allegiant. The money also could be used as a local match needed to receive federal funding to extend Lunken’s runway, a long-time desire of major companies that house corporate jets at the airport.

Last year, Anderton said he discovered MSD had not been paying its $70,000 annual rent. He said he began the process of recouping the money, and asked MSD to start by paying last year’s rent. MSD paid rent in 2012, according to the audit.

City transportation director Michael Moore said he believes personnel changes at MSD contributed to the agency stopping to pay its bills.

But MSD says it was never billed from 2006 through 2011, and that the city is responsible for billing.

“As soon as we became aware that the internal billing process did not occur on an annual basis, MSD contacted DOTE to establish a payment schedule,” MSD spokeswoman Michele Ralston said in an email. “We are in the process of finalizing the payment schedule to pay the remaining outstanding balance.”

CITY SAYS CHANGES TO BE MADE AT LUNKEN

Another significant finding in the 11-page audit shows the operator of the restaurant housed in the airport’s terminal should have paid an additional $105,000 to the city over the past three years.

The lease entered with Sky Galley restaurant in March 2007 established a monthly rent payment of $1,500, which is $1,061 lower than the city’s municipal code permits.

The lease also stipulates that restaurant operator Brakvill, Inc. pay a total of 3 percent of gross revenue each month. But the municipal code sets that rate at 4.75 percent. The audit says Brakvill should have paid an additional $105,402.69 between January 2010 and February 2013.

Moore said the city most likely will not recoup the money, but will work to fix its agreement with Brakvill.

Likewise, the lost landing fees can’t be recouped. A new system has current fees being paid.

The audit recommended city officials work with Landmark to figure out how much the company owes in fees and whether any penalties – which could be 10 percent of the fees – will be applied.

Finally, the audit recommended the airport hire a staff member dedicated to property management to deal with the expired leases. City officials say they’ve already started working toward restructuring a current open position to serve as property manager. The airport has 13 full-time staff positions, and does not plan to expand its staff, Anderton said.⬛